Rivian's Shares Might Soar an Additional 25%, Says One Wall Street Expert
Rivian Automotive's (RIVN) share price has been on a rollercoaster ride, skyrocketing approximately 36.5% in the past month. This surge has caught the attention of Wall Street analysts, with Benchmark's Michael Legg initiating coverage with a bullish "buy" rating. Legg believes Rivian's upcoming R2 vehicle platform, a lower-priced SUV, could resonate with a broader customer base and drive revenue growth.
Legg's optimism is fueled by Rivian's financial health. The company ended Q3 with a substantial cash reserve of around $6 billion, boosted by up to $5.8 billion in investments from automaker giant Volkswagen. Adding to this, the US Department of Energy has proposed a conditional loan of up to $6.6 billion to aid in constructing a second US manufacturing plant.
Legg predicts that this influx of capital will propel Rivian towards profitability by 2028. His price target of $18 represents a 25% potential gain, assuming a swift realization of this target. However, investors should view this as a high-risk investment given the uncertainties surrounding the company and the overall economy.
Rivian's financial performance in 2024 reflects both its ambition and the challenges it faces. The company reported revenue of $4.43 billion, accompanied by significant losses. Despite these hurdles, Rivian maintains a strong liquidity position with more cash than debt on its balance sheet.
Rivian's production growth plans are promising. The company aims to increase its annual capacity to 400,000 vehicles by 2028 with the aid of the DOE loan and new manufacturing plants. In Q2 2024, Rivian surpassed both its delivery guidance and analyst expectations, delivering around 13,790 vehicles.
The company's strategic partnership with Volkswagen could bring a significant investment of up to $5 billion, leveraging VW's expertise in the EV market. This partnership could give Rivian a competitive edge, as analysts predict robust revenue and EPS growth, though profitability remains elusive in the short term.
Investors should exercise caution but remain optimistic about Rivian's long-term potential in the electric vehicle market. With robust revenue growth and a strong balance sheet, Rivian could emerge as a significant player in the EV industry, provided it can overcome its operational challenges.
Legg's bullish stance on Rivian's future is largely based on its financial strength, as the company's substantial cash reserves and potential additional investment from Volkswagen and the US Department of Energy could significantly boost its financial capabilities for investing in its operations and product development in the finance sector. This positive financial situation could potentially attract more investors interested in the company's ventures into the realm of electric vehicles and generating returns through investing in Rivian's stocks.
Given Rivian's robust financial position and the market's growing interest in electric vehicles, exploring further investment opportunities in the company's stock could be a strategic move for individuals looking to diversify their investments in the finance industry, providing an opportunity to reap the benefits of potential revenue and growth of the company in the long term.
